Bottom of Form

Bottom of Form
FYI

Catherine S F Ho, Ph.D.

Professor of Finance
Vice-President, Malaysian Finance Association
Faculty of Business Management
Universiti Teknologi MARA
40450 Shah Alam Selangor
Malaysia
Tel: 603-5544-4792
Fax: 603-5544-4693
Email: catherine@salam.uitm.edu.my
----- Forwarded by Prof Dr Catherine S F Ho/FBM/UiTM on 25/02/2014 13:32 -----

From: Haji Razli Ramli <razli@ibfim.com>

To: catherine@salam.uitm.edu.my
Date: 25/02/2014 11:13
Subject: Clarity on syariah deposits, classification of various types of financial contracts next year

http://www.thestar.com.my/Business/Business-News/2014/02/25/Clarity-on-syariah-
deposits-Classification-of-various-types-of-financial-contracts-next-year/

Business News
Home > Business > Business News
Published: Tuesday February 25, 2014 MYT 12:00:00 AM
Updated: Tuesday February 25, 2014 MYT 7:04:58 AM
Clarity on syariah deposits, classification of various types of financial contracts next year
BY DALJIT DHESI

Email Facebook 1

KUALA LUMPUR: Come June 30 next year, all Islamic banks and commercial banks with
Islamic banking subsidiaries offering Islamic deposits must classify them either as principal
guaranteed or investment accounts which are not principal guaranteed under syariah contracts
in line with the Islamic Financial Services Act (IFSA).
This means that products with Mudarabah (profit sharing) or Wakalah (agency) features are
considered investment accounts which are non-principal guaranteed.
Islamic deposits, on the other hand, like Wadiah (custodian), Qard (loan) and Tawarruq
(sale) are principal guaranteed. Currently, all Islamic deposits are protected by the Malaysia
Deposit Insurance Corp (PIDM).
It is estimated that about 50% of Islamic deposits in the banking system falls under the
investment account category.
Based on PIDMs statistics for the assessment year in 2012, total insured deposits for the
Islamic banking business totalled RM50.2bil compared with RM40bil in the previous year.
A Bank Negara official told StarBiz that such classification was necessary as it would provide
greater legal clarity on the various types of syariah financial contracts and to ensure end-to-
end compliance in full cycle of Islamic banking operations.
From a market standpoint, he said it would not cause inconvenience to customers as they
would now have a choice and be able to differentiate between products that are principal
guaranteed and those which are not that provide potentially higher risk returns like
Mudarabah.
Customers whose Islamic deposit accounts are structured based on syariah contract with
non-principal guaranteed feature will be informed of the alternative products and provided
with sufficient information/transparency to make an informed decision.
They will have a choice to either maintain their funds with Islamic deposit or change to
investment account product depending on the customers risk appetite, he noted.
He said customers would be given sufficient time to inform the banks of their decision,
adding that during this process they would be ensured that their rights and deposits are
protected.
The Financial Services Act (FSA) and the IFSA, which came into effect July last year, has
repealed the Banking and Financial Institutions Act 1989, the IBA, the Insurance Act 1996,
the Takaful Act 1984, the Payment Systems Act 2003 and the Exchange Control Act 1953.
On the possible impact of the move to banks, he said banks were required to make available
alternative Islamic deposit products based on syariah contracts with principal guaranteed
feature as a substitute to the Islamic deposit products with non-principal guaranteed feature.
The official said some Islamic banks have already started to provide alternative Islamic
deposit products.
It is learnt that some banks are looking into the possibility of transferring these deposits to
takaful or Islamic insurers for insurance protection. Banks on the whole were studying the
matter carefully before giving their views to the central bank, an industry observer said.
To facilitate a smooth implementation of the reclassification process and ensure relevant
stakeholders interest are protected, the central bank has formulated a transition plan to allow
banks to complete the process by June 30 next year.

You can find it at.

Haji Razli Ramli

Head / Senior Managing Adviser
Shariah Business Advisory
IBFIM

Tel : +603 2031 1010 ext. 517

Fax : +603 2078 5250

www.ibfim.com

Fw: Clarity on syariah deposits, classification of various types of financial contracts next year
Prof Dr
To:JABATAN PERBANKAN ISLAM FBM Show Details

Bottom of Form

Badrul Hisham Kamaruddin

Jati/SERVER/UiTM

Mail- Fw: Clarity on syariah deposits, classification of various types of financial

Inbox contracts next year

Full Online Help

Preferences Logout

Bottom of Form
From: Haji Razli Ramli <razli@ibfim.com>
Date: 25/02/2014 11:13
Subject: Clarity on syariah deposits, classification of various types of financial contracts next year

http://www.thestar.com.my/Business/Business-News/2014/02/25/Clarity-on-syariah-
deposits-Classification-of-various-types-of-financial-contracts-next-year/

Business News
Home > Business > Business News
Published: Tuesday February 25, 2014 MYT 12:00:00 AM
Updated: Tuesday February 25, 2014 MYT 7:04:58 AM
Clarity on syariah deposits, classification of various types of financial contracts next year
KUALA LUMPUR: Come June 30 next year, all Islamic banks and commercial banks with
Islamic banking subsidiaries offering Islamic deposits must classify them either as principal
guaranteed or investment accounts which are not principal guaranteed under syariah contracts
in line with the Islamic Financial Services Act (IFSA).
This means that products with Mudarabah (profit sharing) or Wakalah (agency) features are
considered investment accounts which are non-principal guaranteed.
Islamic deposits, on the other hand, like Wadiah (custodian), Qard (loan) and Tawarruq
(sale) are principal guaranteed. Currently, all Islamic deposits are protected by the Malaysia
Deposit Insurance Corp (PIDM).
It is estimated that about 50% of Islamic deposits in the banking system falls under the
investment account category.
Based on PIDMs statistics for the assessment year in 2012, total insured deposits for the
Islamic banking business totalled RM50.2bil compared with RM40bil in the previous year.
A Bank Negara official told StarBiz that such classification was necessary as it would provide
greater legal clarity on the various types of syariah financial contracts and to ensure end-to-
end compliance in full cycle of Islamic banking operations.
From a market standpoint, he said it would not cause inconvenience to customers as they
would now have a choice and be able to differentiate between products that are principal
guaranteed and those which are not that provide potentially higher risk returns like
Mudarabah.
Customers whose Islamic deposit accounts are structured based on syariah contract with
non-principal guaranteed feature will be informed of the alternative products and provided
with sufficient information/transparency to make an informed decision.
They will have a choice to either maintain their funds with Islamic deposit or change to
investment account product depending on the customers risk appetite, he noted.
He said customers would be given sufficient time to inform the banks of their decision,
adding that during this process they would be ensured that their rights and deposits are
protected.
The Financial Services Act (FSA) and the IFSA, which came into effect July last year, has
repealed the Banking and Financial Institutions Act 1989, the IBA, the Insurance Act 1996,
the Takaful Act 1984, the Payment Systems Act 2003 and the Exchange Control Act 1953.
On the possible impact of the move to banks, he said banks were required to make available
alternative Islamic deposit products based on syariah contracts with principal guaranteed
feature as a substitute to the Islamic deposit products with non-principal guaranteed feature.
The official said some Islamic banks have already started to provide alternative Islamic
deposit products.
It is learnt that some banks are looking into the possibility of transferring these deposits to
takaful or Islamic insurers for insurance protection. Banks on the whole were studying the
matter carefully before giving their views to the central bank, an industry observer said.
To facilitate a smooth implementation of the reclassification process and ensure relevant
stakeholders interest are protected, the central bank has formulated a transition plan to allow
banks to complete the process by June 30 next year.

You can find it at.

Haji Razli Ramli

Head / Senior Managing Adviser
Shariah Business Advisory
IBFIM
 Tel : +603 2031 1010 ext. 517

Fax : +603 2078 5250

www.ibfim.com

Bottom of Form

Mail- Fw: Clarity on syariah deposits, classification of various types of financial

Inbox contracts next year

Full Online Help

Preferences Logout